In a move that could reshape how health care is delivered and funded across the country, Oregon has enacted a sweeping law—Senate Bill 951—that significantly restricts how management services organizations (MSOs) may support and interact with professional medical corporations (PCs). Widely viewed as the most aggressive corporate practice of medicine (CPOM) statute in the country, SB 951 has major implications for venture capital, private equity, and digital health companies operating in or entering the healthcare market.
While Oregon has long prohibited the CPOM—including the ownership of, and exercise of control over, the clinical aspects of a medical practice by corporations, MSOs, and non-physicians—SB 951 introduces a new level of detail in defining the boundaries between clinical entities and the business entities that support them. Moreover, in addition to imposing more specific operational, governance, and contractual constraints, the law establishes new pathways for the private enforcement of such restrictions, both shifting liability away from PCs and increasing the litigation exposure for MSOs, investors and affiliated entities. As briefly explored in this post, SB 951’s unprecedented and comprehensive approach to the CPOM is sure to reshape compliance strategy and investment risk profiles across the healthcare sector.
Recalibrating the MSO-PC Relationship
At the core of SB 951 is a fundamental realignment of how MSOs may interact with PCs. Under existing Oregon CPOM doctrine, MSOs generally may not exert undue control or direction over the clinical aspects of a medical practice. SB 951, however, goes further, expressly prohibiting MSOs, and their owners, directors, officers, and employees, from (i) owning a majority interest in a PC they manage, (ii) with some exceptions, serving as a director, officer, employee or independent contractor to the PC they manage, (iii) exercising proxy voting rights, (iv) controlling share transfers (e.g., through continuity planning arrangements setting forth the terms of succession or restricting the transfer of stocks), or (v) otherwise exercising de facto control or ultimate decision-making authority over key aspects of the PC’s business or clinical operations.
Specifically prohibited activities include:
- issuing or managing PC equity or dividends;
- negotiating or executing payer agreements on behalf of the PC;
- making hiring and termination decisions;
- setting staffing levels or clinical schedules;
- setting the prices, rates or amounts the PC charges for medical services;
- making diagnostic coding decisions;
- advertising under the MSO’s name;
- setting clinical standards or policies; and
- setting policies for patient, client or customer billing and collection.
While these prohibitions are broadly applicable, SB 951 includes limited exceptions. For example, certain restrictions do not apply where the MSO is owned by a professional medical entity, or where a licensed physician serves as a director or officer of an MSO without receiving compensation for their service. Additional carveouts may apply to legacy structures formed prior to 2026 and to MSOs serving specific entities such as PACE organizations, certified behavioral health providers, tribal health programs, and entities that are engaged in the practice of telemedicine and do not have a physical location where patients receive clinical services in the state.
Governance Rules Tightened
SB 951 also strengthens professional corporation governance requirements under Oregon law. For medical, nurse practitioner, physician associate, and naturopathic entities, a majority of voting shares and board seats must be held by licensed professionals. Removal of directors and officers must follow new due process standards, preventing business-side interference in leadership transitions except under narrow circumstances, such as fiduciary breaches or loss of licensure. Critically, the law also prohibits non-licensees from using contractual and financial arrangements to exert indirect control over PC decision-making or operations.
Contract Restrictions: Noncompetes and Nondisparagement Clauses
The law also invalidates most restrictive covenants. Subject to narrow exceptions:
- noncompetition agreements with licensed physicians, nurse practitioners, and physician associates are now presumptively void, even in hospital or MSO contexts;
- nondisparagement and nondisclosure agreements that prevent clinicians from reporting unsafe or unlawful practices are unenforceable; and
- whistleblower protections are expanded and retaliation by MSOs or affiliated providers is explicitly prohibited.
Enforcement Risks and Private Litigation
SB 951 introduces a new private right of action, creating a pathway for professional medical entities and licensed clinicians to bring civil suits to enforce the statute’s ownership and control restrictions. This creates a direct enforcement mechanism outside of state regulators, increasing litigation exposure for MSOs, investors, and affiliated entities.
Compliance Timeline
Although the bill took effect upon passage, its application is phased. Entities formed after the effective date must comply with the law starting January 1, 2026. Pre-existing entities must comply by January 1, 2029, giving MSOs and medical groups time to unwind or restructure impermissible arrangements.
Implications for Health Care Investment Strategy
SB 951 marks a turning point for health care investors and operators relying on MSO-driven structures. Oregon’s law creates a new compliance playbook and will likely necessitate significant restructuring of existing arrangements in the state, including reviewing and re-working strategies, policies, and practices with an eye toward greater separation between management of the business and its clinical operations. Investors considering roll-up strategies or expanding tech-enabled services in Oregon must account for the material increase in legal and operational risk under the new regime.
Key Takeaways
- Determine whether your organization, or any portfolio company, is operating in Oregon, is registered to do business in Oregon, or has plans to enter the market.
- Evaluate whether any affiliate MSO-PC arrangements (including national models) may be subject to SB 951’s restrictions, even if Oregon is only one of several jurisdictions involved.
- Review and amend contracts to ensure professional medical entities retain full control over clinical decision-making and key business functions, as required under the statute.
- Evaluate the implications of prohibited and voided noncompetition, non-disparagement and nondisclosure restrictions.
- Identify any prohibited ownership interests, profit-sharing arrangements, or management controls that must be restructured prior to the 2026 or 2029 compliance deadlines.
- Evaluate and limit litigation risk taking into account the expanded enforcement opportunities.
- Monitor other states of operation, particularly those with more robust CPOM doctrines, for similar legislative initiatives.
